$10M Bribe to CEO by the VC firm
In 2002, Richardson Roberts founded Verus Financial Management. The company focused primarily on merchant services of credit and debit card acceptance. The company was backed by Financial Technology Ventures.
Verus had significant organic growth among the private merchants with over 100,000 merchant clients doing about $10 billion in annual merchant payment volume.
In 2005, Sage Group PLC, agreed to acquire Verus for $235M. The CEO Roberts made about $50M from the transaction. The VC firm, which owned about 40% of the company earned about $155M from the sale.
Then, Roberts sued the VC firm for $10M side deal that the had entered in to. Robert says that he agreed to the sale only because he was promised extra $10M from the VC firm for the sale.
The judge ruled this week that Roberts committed “an egregious breach of fiduciary duty of loyalty” by putting his personal financial interests over those of his shareholders.
Roberts had told the venture capital firm that without the side payment he wouldn’t sell his credit and debit card financing company because it was still growing and could fetch a higher price at a later date — and because he was going through a divorce at the time.
Even if the sale was in the interests of the company, the side deal was illegal because it would have meant extracting a payment by threatening not to support an advantageous corporate action.
The VC firm said that the investor group didn’t pay Roberts the $10 million because the sales price had been above expectations and because Roberts already stood to earn $50 million from the deal, according to the ruling.
This side transaction was wrong from so many angles. It was wrong for the CEO/Founder to seek extra money on the side, it was wrong for the VC firm to agree to a side deal, it was wrong that the transaction wasn’t approved or discussed in the board, it was wrong that the CEO allowed his personal divorce situation to cloud his judgment.
Unfortunately transactions like these happen way too often. “It’s not a bribe, it is just a tactic to properly incentivise the parties”, they argue. At the time of sale, every participant looks at the cards that they are holding, and attempt to gain some leverage or advantage, and invariably get in to issues with the required corporate formalities, or stepping on the toes of other share holders.
Patent Auction - $2M bid fails to meet reserve, several sold for $1M+
I have written about the value of a patent portfolio to a company before (see here and here); some of the value comes from the inherent technology, some of it comes from being able to block your competitor from doing something, and at times the value of the patent comes from the perceived advantage it gives the company. All of them are valid reasons to acquire and build a decent patent portfolio.
Lately, a lot of people have cautioned that in their opinion, patents are not worth as much. Some recent changes in the Patent Law have provided additional reasons for people to argue that the inherent value of the patent is going down.
I do not agree with that assertion; at least not completely. There may be some valuation variance that will happen because of the recent changes in the patent law, but going forward, the patents will continue to provide strong offensive and defensive tools to succeed in the market place.
An easiest and clearest way to establish the real value of something is to examine some recent transactions, especially when the transactions are “clean” and not encumbered by fuzzy relationships between the parties, and the agreements are not entered into under duress of a lawsuit, and are not undertaken for tax mitigation reasons. An open auction provides such a valuation tool, and is a superb guide to establish the real value of an asset.
There is no Ebay for patents, but there are several companies that specialize in the IP brokerage business. I have dealt with most of them in one capacity of other.
Yesterday, Ocean Tomo, one of the major IP asset brokers, held an open auction in Chicago. There were about 400 patents and applications spread out amongst roughly 70 lots.
Highlights:
- One of the lots, which has 3 patents and several other pending applications related to GPS location based system and logistics, got a bid of $2M+ but failed to sell because it did not meet the reserve price. The auctioneer’s estimate was about $5M.
- Online ticketing system patent went for $1.00M (estimate was $2.2M)
- Digital Media System and management patent went for $1.75M
- Computer interface device patent went for $750k.
- Several others sold for $500k+
- About 50% of the patents sold, which is typical.
Generally, after the auction is over, and for patents that did not meet the reserve price, there is some negotiation between the patent owners and the interested parties; so the total revenue realized from this patent auction will exceed the previous auction amount of $10M.
While the overall perceived value of patents might see some reduction because of the change in the patent law, there is still a healthy demand for innovative technologies and the competitive advantages they can provide in the marketplace.
TubeMogul : Tracking the tubes - analytics for web videos
TubeMogul allows you to simultaneously upload your videos to several major video download sites (YouTube, Brightcove, Blip, Google Video, Metacafe, Yahoo, etc.) and then it tracks the viewings. Just the unified upload feature of the TubeMogul is a great time saver and then having the analytics available makes it even more attractive.
They recently published a white paper that describes their “secret Formula” of what makes an online video a success based on the most number of views.
“Secret Formula” - .5C + 15.M + .20T + .15P = Success
Alright, we admit that an exact formula may be a bit over simplistic, but when it comes to deciding how to allocate time and resources on a video intended on marketing something virally, the weighting of these four components should follow closely to something like this: That’s it. Write down the formula above on a cocktail napkin and you have the code cracker for getting people to watch and forward your video. The formula above says that creating a video is a weighted function of four components:
50% C = Content and Production - this is storyline, style lightning, production, etc.
15% M = Metadata - the text title, keywords, descriptions, and categories that help people find your video
20% T = Thumbnail - the packaging which draws people in when displayed on the page
15% P = promotion - just good old fashioned marketing
I am not sure if I agree with the formula; thumbnail is probably more than 20% where the most choice of what to watch are made based on the visual input. In fact, one of the example they describe has everything other than meta data and thumbnail and it still got 7M views. Of course, it was about Britney spears, so it shouldn’t even have been included in the formula in the first place.
What I do know is that having detailed information of who is watching the video will certainly be helpful in fine tuning the meta data, tags, thumbnail and the content to get your message across.
Tags : analytics, meta data, Startups, tubemogul, video, youtube
Science Sunday: Using Magnetic Sensors for Global Positioning.
If birds do it, and even hamsters do it, I am sure we can figure out a way to do it too; I am of course, referring to the use of magnetic sense to navigate on a long journey.
The method is called Magnetic Global positioning. The idea is simple; the earth is like a giant bar magnet placed along the it’s axis. All we need to do is to take precise measurements of the earth’s magnetic field around the globe and then when you want to find out where you are, just check the magnetic field of that location!
Where do you get the magnetic field data around the globe? Well, it turns out that the United States Geological Survey has already done the work. It has tabulated the Earth’s mean field and its inclination at many points over much of the Earth’s surface.
To measure small magnetic fields, we simply rely on the two guys who just won noble prize in physics for discovering Giant Magnetoresistance Effect. They showed that for certain materials, a small change in a magnetic field makes a large change in the associated electric field. In fact, your hard drive and the IPods , work the same way too!
So to find your location, you measure the magnetic field and its inclination , and compare it with the known value and you know exactly where you are! No satellite needed.
Although less accurate than satellite GPS, the new sensor’s use of the magnetic field means it is more reliable in certain situations. For example, in remote areas that have no satellite reception, or in bad weather conditions where the connection is temporarily lost.
The accuracy of the positioning accuracy is dependent on the accuracy of the magnetic data for a location and that can be significantly improved. The next time when Google or Amazon is doing a “street view” perhaps they can carry a magnetic sensor with them too!
I am not even suggesting that we use it instead of GPS, we might want to consider using it in conjunction with the GPS . In downtown areas where the tall buildings are blocking access to the GPS satellite, the magnetic positioning will take over. The magnetic position can also be used indoors, like in a parking structure or a building.
Via NewScientist
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